Road map for an eco-system to progress with co-existing differing technologies To move forward it will be necessary to reach agreement on where best to place unlicensed

bands in view of the progression of other users to new frequencies under spectrum reform.

Here an economic analysis of where an EU agreement could place unlicensed spectrum is required. Even a relatively small shift could have significant economic consequences. It would then be implemented through performance limits on devices and testing for conformance. Thus the next step is towards defining fixed-boundary frequency bands, which should gradually be converted to either exclusive property rights, or to be part of the commons, with mechanisms for reversibility at some future point.

This division would entail establishing some robust measure of spectrum efficiency usage, in terms of optimizing the amount and economic value of communications that occur.

All of this will need a common sense regulatory framework to avoid the chaos that might result in abandoning a national allocation system, and to also avoid opposition to reform based on its poor organization. Questions will have to be asked such as whether today’s (public) terrestrial and satellite broadcasting is in some way socially valuable and deserves special privileges, while the priorities are more obvious for public safety services. In the traded bands, attention must be paid to windfall profits from secondary trading against consumer welfare and the price of communications.

The future framework for spectrum management may be founded on some basic measures such as a spectrum registry and an EU facilitator. Key areas to then consider and decide on include: trading standards for market-based allocations; privatization of public services including public safety communications; reserved spectrum for special interest groups;

overlay rights, of ‘borrowing’ licensed spectrum; underlay rights, e.g. use of innovative technologies such as UWB; and the digital dividend allocations. Far more radical management restructuring, such as abolishing an EU facilitator and the NRAs and replacing all with a spectrum court, to deal with questions of allocation and conflicts over interference as has been suggested for the USA, does not seem at this time to be valuable.

Instead we envisage a progressive managed transition to new usages of the spectrum in a gradual manner over the decades, with changing portion so the spectrum allotted to each form of assignment, as shown in the possible road map of Figure 9.

Figure 9: A road map for a shared spectrum eco-system,

Projections of percentages of each type of spectrum allocation

0 10 20 30 40 50 60 70 80 90 100

1995 2000 2005 2010 2015 2020 2025

Managed command & control Markets, 2ndary auctions Commons

5. CONCLUSIONS AND RECOMMENDATIONS

5.1 Conclusions

The radio spectrum is an essential factor for economic progress in the EU – it is a key basis for future productivity, specifically when used for ICTs. But it has more than just commercial objectives – it has a social dimension. The value of the spectrum must be seen in the context of social trends and the public objectives for the well being of the citizen.

As such there are implications for a true single market that are linked to spectrum governance for EU-wide uses. In order to build up all the economies in the EU-27 to be equally prosperous, especially to close the digital divide, spectrum management and assignment needs to be reviewed and revised. In this regard, a mobile Internet with optimal cost efficiency over a broadband bearer will become a prominent demand. However, fragmented regulation will make this more difficult to achieve.

The current disposition of spectrum is inefficient. Older technologies have taken the prime spectrum at lower frequencies and with new technologies being developed there is now a need for spectrum reform. The prime bands at lower frequencies offer better propagation for much lower cost networking and superior building penetration for high bit rate services such as broadband (mobile, or fixed radio local loop) (European Commission (2004).

Thus spectrum management reform will require dialogue involving all Member States to pursue two seemingly contrary goals – a harmonized EU-wide approach with more flexibility and ease of assignment.

EU harmonization of the spectrum has the advantage of organizing a common context for future radio e-communications services. This is increasingly important as the EU progresses in integration commercially and in lifestyles. New radio services can be expected to expand in functions, numbers of users and types of usages. We may expect a far heavier dependence on such services by future EU citizens, in the areas from health to supporting complex lifestyles and a range of new business usages. Opening up of EU-wide service markets should be more competitive and so more cost efficient for users. Harmonization of spectrum usage also means that volume manufacturing can cut the costs of handsets and networking equipment and drive towards common user interfaces.

Harmonization also could reduce the bill to Member States for governance and regulation if some of their responsibilities can be handed over to a central EU coordinator. However, there are arguments against this that should be taken into account, notably:

• The national plans for spectrum uses, especially for broadcast public services, which may be constrained, although they may be seen as having a social role. However even here, the use of common frequency planning across the EU for terrestrial DTV and future developments in its definition may benefit all in the long run, as far as audiences covered, consumer equipment and possibly consumer confusion.

• The problems of negotiating with NRAs, and with Member State governments to reduce their powers, by effectively handing them over in some areas.

• Removal of restrictions on spectrum use in terms of technology and service neutrality in the EC proposals is a key issue. It could substantially increase the benefits that EU industry and society derive from spectrum use.

On the question of ‘flexibility’, the requirement for co-existence of multiple allocation methods should be considered, the several contenders being:

• a commons for all, with unlicensed bands, becoming the most important.

• trading spectrum with a market mechanism, in co-existence with a free commons.

• collective use in the sense of sustainable interleaving between licensed bands and also overlaps with low interference, perhaps with an arrangement of primary and secondary users.

• managed command and control, the designated assignment by the authorities.

When we examine these various options, the basis for choosing between them is twofold:

first, the extent to which the method enables real competition and market freedom stimulating the innovation that will spur the EU economy in terms of jobs, productivity, revenues and overall GDP growth; second, the degree to which the method puts communications at low cost into the hands of the citizen.

This implies ease of entry for the new, for rapid advances in services and their costs as much as pure technology. Thus the main criteria choosing between the different allocation methods turn on measuring how each encourages:

• Fast and easy entry for new radio-based services, service providers and technologies

• Low cost of entry for new service providers and new technology producers

• Efficient (re)use of spectrum

• Innovations in technologies, services and business models

• Neutrality on services or technologies, such that the allocation method does not become a barrier to entry to either

• Minimal regulatory intervention

• Low cost of management (by regulators).

Thus although markets and licence auctions seem to be interesting in the light of the above, their ability to act as a barrier and to choke off new entrants without deep enough pockets, who could introduce more competition and new technology, is less often admitted. The 3G UMTS auctions paint a dismal picture here.

Decisions should driven by economic policy rather than technology or politics, for instance when allocating the digital dividend from the analogue TV switchover. In essence there are two key questions on the proposed EC spectrum policy, first:

How well do the proposed measures fit the needs and potential economic success of Europe in optimally managing, allocating and using spectrum?

The answer from reviewing the EC policy documents is - fairly well. The whole subject is being taken seriously enough and the various proposals are sound as far as they go. But the dialogue is dominated by two considerations:

• The balance between Member States and the EU over governance – is there a need for an EU regulator for harmonized spectrum allocation, and so would policy making and implementation be at an EU level, or national level, or both? The proposal by the European Commission for a European Telecommunications Market Authority obviously prompts the question of whether it could play such a role. Spectrum liberalization is one of the few cases that may well justify a ‘necessary centralism’.

This would enable a new spectrum framework to be created, which itself requires a strong degree of harmonization, to eliminate waste through inconsistent use of frequencies across Europe. The European Telecommunications Market Authority, as proposed with its power of veto over national regulators, appears to be the logical platform for liberalization of the spectrum (and the whole industry) – emphasising competition and investments in innovative services and technologies. As such it is the place to position an EU coordinator for spectrum allocation, one who must negotiate change and migration among the Member States, to organize spectrum harmonization across the EU.

• The move to trading as the only alternative to managed command and control with no real consideration of other alternatives. This US-centric view is presumably made for reasons of the tax harvests that Member State treasuries anticipate, and also perhaps the EC for centrally managed EU-wide auctions.

The second question is:

What is missing or needs to be changed?

Our analysis highlights several missing items:

• Identification of where each allocation method fits.

• A scheme for a harmonized approach to releasing spectrum from the military and national public services, in terms of inducements to relinquish spectrum and in the bands of spectrum released and retained by these public service users.

• Legal frameworks for shared spectrum in licensed bands.

• On the technical/regulatory side, the anticipation of more unlicensed bands for a commons and agreement on their source.

Future mobile services and their spectrum requirements are likely to be in two major directions. First is the need for more bandwidth to support major expansion in mobile and fixed-radio broadband. Second is the expansion of new radio technologies which depend on the computer industry model of unfettered communication, of a commons of unlicensed bandwidth, with regulation focused on the terminal devices technical specification, à la WiFi.

Unlicensed spectrum will be the basis for the advanced innovation for ICT products and R&D for the next two decades at least.

We conclude with the principle that future operation of e-communications and entertainment radio networks will move more towards Internet access but from a mobile handset. In this model, any terminal device may access any radio network in a completely free manner.

5.2 Recommendations

Suggestions for the way forward should therefore include:

• Harmonization of EU spectrum management reform to be pursued immediately – a framework for carrying out a comprehensive spectrum management for Europe is required. The catalyst would be a central coordinator at EU level, able to facilitate a phased transition in spectrum management across the EU. This facilitator should co-ordinate reforms in concert with NRAs with a registry database of users and uses. The facilitator should have sufficient authority to follow through the reforms below, appropriate to the responsibility for co-ordination.

• Technical neutrality – no specification of any technology or standard. A phased transition to this is recommended, with time limits and milestones.

• Service neutrality – any spectrum band may be used for any application. The notion that function of a specified band is fixed for all time should be abandoned, although there may be agreements to use several or many associated services in one band, e.g. for TV.

A phased transition to this is recommended, with time limits and milestones.

• Far more spectrum progressively built up into a commons of unlicensed bands – note that governments may be against this for tax reasons. This move would accompany a change of model of spectrum use – that of unfettered access, similar to the Internet, which is not really yet considered in EC policy.

• Collective spectrum use in the sense of sharing licensed bands, with secondary users, who interleave and overlap without interference.

• Releasing public services and military spectrum to commercial and individual users – the way forward in refarming may be to encourage users with financial incentives to sell their surplus spectrum as a licence to whomsoever they wish, or place it in the unlicensed commons. The former would enable market forces to drive the specific frequencies and amount of spectrum available.

• The digital switchover from analogue to digital TV and the digital dividend as part of harmonization should re-apportion large amounts of the spectrum (of the order of 75%) to non-broadcast TV applications including mobile and fixed-radio broadband access in licensed and unlicensed bands.

• Reform of institutions for standards and research in Europe, so that failures over IPR, standards and technology are not repeated (e.g. UMTS, ERMES, etc). A new R&D initiative with a centre of excellence, a European radio research institute would be ideal.

Its goal would be to pursue open, public research for radio technology and for building up global technical standards, establishing an IPR base to avoid the threat of private hoarding of key patents.

• Finally, the European Parliament has a significant role to play in ensuring that the EU develops spectrum policy fit for purpose and in light of technological progress and market development. This of course includes its traditional role in amending or, if necessary, rejecting legislation. Beyond this, the European Parliament is ideally placed to highlight the importance of spectrum policy through raising the profile and level of the debate on this topic through the use of, for instance, non-binding resolutions, committee hearings, written declarations, and so on. The topic is complex but it is crucially important that Europe’s citizens understand its importance.

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